These are numerous and sometimes rather complicated. The bookkeeping for rediscounts and Federal Reserve bank advances will be explained in a subsequent chapter. However, a few of the day to day transactions which increase the reserve are the following:

1. An Excess Clearing House Balance - In Reserve bank cities where Reserve banks settle the clearing house balances, if a bank sends a greater amount of checks than it receives back from the clearings, the result is a debit to the reserve, for example: If this bank sends out $300,000 worth of checks and receives back $290,000, the result in general ledger changes would be as follows:

The detailed process by which this is accomplished in the various Reserve cities for member banks may vary, but the effect is the same. After the morning proof the clearing house manager would report to the Federal Reserve Bank the excess or deficiency for each clearing bank, and the Reserve bank or branch would debit or credit member banks accordingly. The member banks receiving as they do the same figures, make corresponding entries on their own books. Of course, there are various other ways of settling clearing house balances in different cities.

2. Checks Deposited - Certain checks deposited by member banks located in the same city as a Federal Reserve bank may be charged to the reserve account on the same day, provided they are in the hands of the Federal Reserve bank for collection before 9 A. M. The general ledger entry covering such items would be:

Debit: Reserve at Federal Reserve Bank (10) Credit: Due to Depositors (37)

3. Transit or Out-of-town Items for Which Remitting Customers of the Bank Have Been Credited - Owing to the volume of these items and the variety of their sources much detail could be given with respect to them, but that would be largely a matter of bank operation. It must suffice here to exhibit only the basic entries involved in their dispatch. These transit items are deposited for the most part by customers in their daily deposits and remittances. As depositors have been credited with them on receipt, the items must be charged to some account on the ledger pending their actual collection. If they are collected through the Federal Reserve System they are charged to No. 18, "due from Federal Reserve bank-Collection account," as an offset to the credit given the depositor. After the lapse of one, two, four, five, or eight days, depending upon the time it takes to send the items to the drawees throughout the country and receive back the funds for them, the collection account just mentioned is credited, and the reserve account charged. To illustrate specifically: Assume that a member bank located in New York City receives from its depositors on June 30 $5,000 worth of checks drawn on a member bank located in the city of Chicago. In accordance with the Federal Reserve regulations which are based on the back and forth transit time between New York and Chicago, the reserve account, No. 10, would be charged on July 2. The general ledger entries, therefore, on June 30, the date the bank receives the checks, would be:

On July 2, the available date, the general ledger entries would be:

A transit letter containing the $5,000 worth of checks would be sent on June 30 by the New York member bank to the Chicago Federal Reserve Bank (either direct or through the district Reserve bank), and a notice would also be sent to the Federal Reserve Bank of New York, stating that these checks to the value of $5,000 had been sent, which would cause the New York Reserve Bank to set up in its own ledgers figures to agree with those of the member bank in its city.

Auxiliary Record Of The Federal Reserve Bank Collection Or Float Account

Having explained the use of the Federal Reserve Bank-collection account, it is probably advisable to explain here the supporting Federal Reserve Bank-collection ledger. This is ordinarily a record of the Boston or progressive type similar in character to the illustrations of the general ledger previously given. In the usual form the names of the Federal Reserve banks and their branches are grouped in classes down the middle of the page, on each side of which are debit and credit columns for each day as follows:

From the foregoing it will be observed that a charge has been posted on June 30 for $5,000 worth of checks and that a corresponding credit signifying the fact of collection has been put through opposite Chicago on July 2. Irregular items not paid, of course, would require adjusting entries after their irregularity was reported. There are seperate classifications on the collection ledger, just illustrated, for each group of transit points namely one, two, four, five and eight.

The principle is the same in each group, viz: A debit on the date the items were sent for collection and a credit on the automatic available date. The grand total of all debit balances in each classification on the collection or transit ledger must agree each day with the balance of the general ledger Federal Reserve bank-collection account No. 20.

4. Deposits of Cash Made by Member Banks - Member banks frequently send cash to the Federal Reserve bank to dispose of surplus currency or to build up their reserves. The general ledger entries covering such a transaction are as follows:

5. Time Collections - Collection items are frequently sent to the Federal Reserve bank for collection, and on receipt of the advice of payment the following entries are made by the member bank which sent the items:

It should be remembered that when the account "due to depositors" is debited or credited, it causes an entry to the debit or credit of some depositor's account as well. That fact is not shown in these illustrations, but should be constantly kept in mind.

Auxiliary Record Of Reserve Account

No auxiliary record is needed other than the detail shown on debit and credit posting sheets usually kept by the general bookkeeper. The reserve account should, however, be frequently reconciled with the statement of it rendered by the Federal Reserve bank. Reconcilements are subsequently explained.